Debt needs sort­ing now

Matamata Chronicle - - News - By DAVID KNEEBONE,

Re­duc­ing debt makes it into the top five most pop­u­lar New Year’s res­o­lu­tions, along with los­ing weight and get­ting fit. As you con­tem­plate your money res­o­lu­tions for 2013, it’s im­por­tant to make sure you have the ba­sics sorted.

If there’s just one rule for man­ag­ing your money, this is it. If you’re liv­ing from pay to pay, and not re­duc­ing your debt or grow­ing your sav­ings, you need to take con­trol with a money plan. A good place to start is to track your spend­ing over a cou­ple of weeks or a month – then use that to cre­ate your bud­get. You might be sur­prised where your money goes.

If you have dumb debt – that is, high-in­ter­est debt such as debt on a credit card or store card which could be avoided, your pri­or­ity should be to get rid of it as fast as pos­si­ble. List your debts in or­der of their in­ter­est rates and put as much as you can to­wards the one with the high­est rate. Once you’ve paid that off, put the ex­tra money to­wards the next debt with the high­est in­ter­est rate. It’s the fastest way to be­come debt-free – pro­vid­ing you avoid tak­ing on any new debt!

If you haven’t saved reg­u­larly be­fore, start­ing a sav­ings habit might seem hard. The trick is not to worry about start­ing small – even $20 a week will grow quicker than you think. Re­view your bud­get and see what you can af­ford to save reg­u­larly. Open a sav­ings ac­count and set up an au­to­matic pay­ment that goes into it as soon as you get paid. Mak­ing sav­ings au­to­matic will help you build a long-term habit. As well as sav­ing for the short­term, make sure you’ve set some long-term sav­ings goals, like sav­ing to buy your first home and for re­tire­ment.

Noth­ing dis­rupts a well-planned bud­get like un­fore­seen ex­penses such as ma­jor car re­pairs or med­i­cal bills. Sav­ing up for an emer­gency fund is an im­por­tant goal. Ide­ally, you should aim to save up the equiv­a­lent of three months’ ex­penses.

If your cir­cum­stances have changed re­cently, you’ll need to check that your in­surance still meets your needs. Make a date to re­view your in­sur­ances each year.

David Kneebone

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